Investing glossary
Portfolio rebalancing
Rebalancing a portfolio means returning each asset's weight to its target proportion after the market has thrown it off, to keep the risk level you chose when you designed it.
The two most common methods are calendar-based (review and adjust on a fixed date, e.g. once a year) and threshold-based (only act if an asset drifts beyond a defined threshold, e.g. ±5 percentage points).
If you contribute every month, the simplest way to rebalance is to steer new contributions toward the asset that has fallen behind, instead of selling existing positions — this avoids triggering a sale and its potential tax.